How the undertaxed, polluting aviation sector can help fix the EU budget

The EU is now drafting its post-2020 budget with a proposal expected in May 2018. The annual €10-14 billion gap that will be left as a result of the UK’s departure from the EU has triggered debate on alternative sources of revenue for the EU budget.

Taxing climate-intensive transport would encourage smarter transport behaviour and accelerate the uptake of cleaner technologies. The potential revenue from such taxation is just over €50 billion per year – and of that €38 billion could potentially come from the aviation sector. A small part of these revenues could be used as EU own resources – where it should be earmarked for climate spending. But the bulk would become available to member states to reduce labour taxes or other economically harmful taxes.

T&E estimates that taxing aviation fuel for domestic and intra-EU flights at the EU mimimum rate of 33 cents/litre set by the Energy Tax Directive could generate about €9.5 billion in additional revenues each year. Abolishing the exemptions and applying a 15% VAT to all passenger transport could generate a further €17 billion while a common ticket tax on EU departures could generate around €11 billion – or more. Ticket taxes are widely levied around the world.